Senate energy committee reports energy bill
A US Senate committee on May 26 reported comprehensive energy legislation that raises a proposed mandate for ethanol in gasoline and lacks two key provisions supported by the oil and gas industry.
The bill, by the Committee on Energy and Natural Resources, would phase in a mandate that US gasoline contain 8 billion gal/year of ethanol by 2012 (OGJ Online, May 26, 2005). Earlier proposals, including one in an energy bill passed Apr. 21, set the peak ethanol requirement at 5 billion gal/year.
The full Senate must vote on the bill, which the committee passed by a vote of 21-1.
Measures sought by the oil and gas industry and missing from the Senate bill are approval of leasing of the Arctic National Wildlife Refuge Coastal Plain and protection from product-defect liability for makers and blenders of the gasoline additive methyl tertiary butyl ether.
The House bill contains both provisions (OGJ, May 2, 2005, Newsletter). Disagreement over the MTBE measure is a reason the House and Senate have been unable to reconcile energy bills in the past.
Among other oil and gas provisions, the Senate committee bill would:
- Provide incentives for gas production from deep wells in shallow waters of the Gulf of Mexico.
- Authorize suspension of federal royalty for production from leases in more than 400 m of water, subject to volume limits and price thresholds determined by the secretary of energy.
- Provide for royalty suspension for marginal offshore production in Alaska.
- Provide a $20 million/year authorization for 5 years for development of a program to deal with abandoned wells on federal land.
- Authorize tar sands leases separate from oil and gas leases.
- Require federal leasing of land for oil shale research and development.
- Make the Federal Energy Regulatory Commission the lead agency for administration of the National Environmental Policy Act.
Oil industry groups are opposing certain elements of the bill. The National Petrochemical Refiners Association said the Senate-mandated increase in gasoline additives, which would about triple the current amount of ethanol entering gasoline streams, would “make it more difficult and costly for refiners and petrochemical manufacturers to provide the fuels and petrochemical products that the nation’s economy and American consumers depend upon.”
The American Petroleum Institute, which supports the 5 billion gal/year ethanol mandate, said, “If enacted into law as part of comprehensive energy policy, the 8 billion gal standard would mean higher energy costs for consumers, according to the US Energy Information Administration.
US fossil energy R&D funding partly restored
The US House of Representatives has restored partial funding for fossil fuels research and development in its recently approved 2006 energy and water appropriations bill.
Passage of the bill counteracted the President George W. Bush administration’s proposal for cuts in the 2006 fiscal year budget that would have terminated key US Department of Energy fossil energy R&D programs. The administration cuts also would have scratched DOE’s Office of Oil and Natural Gas, the only federal agency exclusively responsible for oil and natural gas policy.
“We are hopeful the Senate will follow suit [in restoring this funding],” said Christine Hansen, executive director of the Interstate Oil and Gas Compact Commission. “R&D funding is a critical component of any national energy plan.”
Analysts see surge in offshore wind projects
More than 2,300 wind turbines are expected to be installed offshore over the next 5 years, primarily off the UK, at a cost of $13 billion, said John Westwood of Douglas-Westwood Ltd., Aberdeen.
High oil and natural gas prices have greatly improved the comparative economics of offshore renewable energy, which has been attracting considerable attention, Westwood said.
A recent Douglas-Westwood and ODE Ltd. analysis of expenditure on the Scroby Sands offshore wind farm, a 60 Mw, 30-turbine project that ODE brought into production off the coast of Norfolk earlier this year, shows that such projects can benefit UK companies and workers.
On the £80 million Scroby Sands wind farm, 48% was spent in the UK, with 16% spent in the “East of England region,” said Douglas-Westwood officials. More than 656,000 man-hr were committed to manufacturing, construction, and operations, with workers across the UK winning 73% of the jobs and local personnel, nearly 30%.
First quarter US petrochemical output down
Total production of 15 US petrochemicals in first quarter 2005 dropped 4% from fourth quarter 2004 but increased 13% over first quarter 2004, according to a survey conducted by VERIS Consulting LLC, Reston, Va., for the National Petrochemical & Refiners Association.
Output of the petrochemicals surveyed in the first quarter totaled 52.8 billion lb, compared with fourth quarter 2004 production of 55.0 billion lb and first quarter 2004 production of 46.8 billion lb of the same chemicals.
The petrochemicals surveyed include ethylene, propylene, butadiene, benzene, mixed xylenes, and the largest volume first and, in some cases, second derivatives.
Inventories of the six petrochemicals reportable was 3.9 billion lb in the first quarter, compared with 3.2 billion lb in last year’s first quarter and 4 billion lb in fourth quarter 2004.
MMS receives bids on Eastern GOM Sale 197
The US Minerals Management Service received $6,595,753 for 10 leases it awarded in its Mar. 16 Sale 197 in the Eastern Gulf of Mexico.
MMS had offered 124 tracts for bidding, but nine companies bid on only 12 of them. The parcels are located more than 100 miles off Alabama in water more than 1,600 m deep.
Bids totaled more than $6.97 million on the 12 tracts, each of which received one bid. “However, one company declined its two awarded leases-De Soto Canyon Block 448 and De Soto Canyon Block 492,” MMS said.
A consortium of Helis Oil & Gas Co. LLC, Red Willow Offshore LLC, and Houston Energy LP were the highest bidder at $2,037,379 for Lloyd Ridge Block 272.
The second highest bidders, Spinnaker Exploration Co. LLC and Dominion Exploration & Production Inc., submitted a $1,566,000 bid on De Soto Canyon Block 797. Petrobras America Inc., the third highest bidder, submitted a $552,384 bid for Lloyd Ridge Block 92.
Industry Scoreboard
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Exploration & Development - Quick TakesAzerbaijan approves three onshore PSAs
Azerbaijan President Ilham Aliyev has approved three production-sharing agreements (PSAs) for onshore oil fields.
The projects include a 25-year agreement between State Oil Co. of the Azerbaijan Republic (SOCAR) and the UK’s Caspian Energy Group for development of Kyurovdag field; an agreement with Noble Sky (a joint venture of China’s Shengli Oil and Azerbaijan’s Middle East Petroleum) for rehabilitation and development of Garachukhur field; and a 25 year agreement with Azen (a 50-50 joint venture of Istanbul-based Enka and Azerbaijan’s AzPetrol Group) for development of Binagadi field.
SOCAR and Caspian Energy Group each have a 50% interest in 115 sq km Kyurovdag field, which covers three blocks: North, Central, and South Kyurovdag. Oil reserves total 5.5 million tonnes.
SOCAR holds a 25% share of Binagadi, and Azen, which must pay a $1 million bonus within 30 days, holds 75%. The 43.46-sq km contract area includes six fields, the largest of which is Binagadi. Reserves are estimated at 5.5 million tonnes.
SOCAR also has a 25% stake in the project to rehabilitate and develop Garachukhur field, with Noble Sky holding 75%. The contract covers 11.5 sq km.
BP finds hydrocarbons on Stones prospect
BP Exploration & Production Inc. has found hydrocarbons with its exploration well drilled on the Stones prospect on Walker Ridge Block 508 in the Gulf of Mexico.
BP holds 59% interest and operates the prospect well, which was drilled in 9,576 ft of water. Further drilling is needed, BP said, to determine the commerciality and the extent of the discovery.
Transocean Inc.’s Deepwater Horizon fifth-generation dynamically positioned semisubmersible rig began drilling the well late last year and reached TVD of 28,560 ft on Mar. 10.
Other partners in the prospect are Shell Exploration & Production Co. 26% and Marathon Oil Co. 15%.
Group to develop discoveries off Brazil
A consortium led by operator Petróleo Brasileiro SA (Petrobras) and including Queiroz Galvão SA subsidiary Queiroz Galvão Perfurações SA, Oslo-based Northern Oil ASA-NaturGass (USA) AS, and Brazilian independent Starfish Oil & Gas SA have signed agreements to develop properties in the Camamu and Almada basins off Brazil. Petrobras has scheduled drilling in each.
One license covers the 2000 Manati gas discovery, which is scheduled on stream in 2006 (OGJ Online, May 16, 2005).
Another discovery south of Manati has 10 million bbl of oil and 2 billion cu m of natural gas extending into a third-party field.
Northern Oil reported it will pay $85 million, including dry hole and testing costs, for five exploration wells to be drilled this year, costs for drilling delineation wells, and costs for building infrastructure in Manati field.
Under its agreement, Northern Oil also will own a 10% stake in a 125-km, 24-in. pipeline being built with a terminus close to Salvador.
PTTEP, partners make discovery off Vietnam
A group including Thailand’s PTT Exploration & Production PLC (PTTEP) has made an oil and gas discovery on Block 9-2 off southern Vietnam.
CNV-3X, the third appraisal well in the 1,370 sq km tract, was drilled to 6,123 m TD and tested flows of 9,010 b/d of crude oil and 22.6 MMcfd of gas.
PTTEP owns a 25% equity stake in Block 9-2, with Petrovietnam Exploration Production Co. holding 50% and Soco Vietnam Ltd. 25%.
The well will be suspended as a potential producer. The rig next will drill the Te Giac Trang prospect on Block 16-1, a nearby 3,350-sq km prospect licensed to the same group.
The TGT-1X well will test an Oligocene interval in a previously undrilled part of Block 16-1. It is the second well in the 4-6 well 2005 drilling program in Vietnam.
Israel onshore wildcat approaches target
Zion Oil & Gas, Dallas, was drilling below 11,571 ft on May 25 at a wildcat reentry projected to Triassic carbonates in northwestern Israel.
Ma’anit-1 has a primary objective in Triassic Mohilla reefal dolomite on the 95,800-acre License 298/Ma’anit-Joseph. That formation is expected at 12,600 ft.
Lapidoth Israel Oil Prospectors Corp. has the contract to deepen the well to 14,850 ft.
Ma’anit-1 was spudded in 1995 and abandoned at 7,661 ft in Middle Jurassic due to insufficient funds (see map, OGJ, July 5, 2004, p. 42). Israel extended License 298 for 2 years through Apr. 30, 2007.
Meanwhile, Givot Olam Oil Exploration LP, Jerusalem, plans to spud a horizontal well, possibly within weeks, targeting oil in the Mohilla in undeveloped Meged oil field 20 km northeast of Tel Aviv and south of License 298.
Serica prepares to drill block in Java Sea
Serica Energy Corp., Toronto, has requested tenders for a rig to drill on its Biliton Block between Java and Kalimantan in the Java Sea in late 2005 or early 2006.
Serica plans three wells, depending on results of a seismic program.
The company recently completed a 2D seismic survey-an infill program designed to acquire data over several large structures identified from an initial 2,000 km of 2D seismic data acquired in January-February 2004.
A total of 2,300 km of 2D seismic data and gravity and magnetic data were acquired in April. The processing and interpretation of that data will take about 6 months.
Serica, the operator, signed the Biliton production-sharing contract Dec. 30, 2003, giving it a 90% interest in the block.
Aaiun basin off Western Sahara open for licensing
The Saharawi Arab Democratic Republic has promulgated an international licensing round to cover 12 sparsely explored blocks in the Atlantic Ocean off disputed Western Sahara in northwestern Africa.
SADR offered 12 of the 18 blocks it has delineated. The blocks cover 15,417 to 23,172 sq km each in water as deep as 3,600 m in the Aaiun basin. The round will close Oct. 31.
A map, basic geological information, and petroleum legislation are available through the website of Wessex Exploration Ltd., London.
Wessex, which is analyzing data from the Aaiun onshore, noted that the Mesozoic and Tertiary age basin covers 235,000 sq km on land and offshore to the continental shelf break and a further 80,000 sq km of continental slope to the abyssal plain. No working petroleum system has been proved in the basin.
Morocco claims Western Sahara, which lies between Mauritania and Morocco.
Questar units, Ute tribe sign gas agreements
Two Questar Corp. subsidiaries have signed agreements with the Ute Indian tribe for gas projects on tribal lands in the Uinta basin of northeastern Utah.
Questar Exploration & Production Co. will explore and develop a 12,557-acre block in the Wolf Flat area. The agreement commits Questar to drill one well this year and shoot a 2D seismic survey.
Questar has a continuous option to drill additional wells to earn mineral-development leases on tribal lands. The Ute tribe has the right to as much as 50% working interest in the wells.
The area is adjacent Quester’s recently completed Flat Rock 9P-36-14-19 well, which is producing 5 MMcfd of gas from multiple pay zones in the Entrada, Morrison, Cedar Mountain, and Dakota formations. Additional intervals remain isolated beneath a drillable composite frac plug. Questar has a 100% working interest in the well.
Separately, Questar Gas Management Co. signed a letter of intent to form a joint venture to construct, own, and operate a gas gathering system serving Wolf Flat and other areas in the basin.
The system will connect to interstate pipelines operated by Questar, Northwest Pipeline, and Colorado Interstate Gas.
Drilling & Production - Quick TakesUzbekistan oil, condensate output down
Uzbekistan’s state-run Uzneftegaz has reduced production of oil and gas condensate by 16.7% to 1.95 million tonnes and natural gas by 1.2% to 20.22 billion cu m in the first quarter of 2005, compared with the same period of 2004.
For all of last year, Uzneftegaz reduced production of oil and condensate by 7.8% to 6.85 million tonnes from the 2003 level, but it increased natural gas output by 4.1% to 59.864 billion cu m.
US drilling at 5-week high
US drilling activity increased the week ended May 27 to the highest level in 5 weeks, up by 16 units with 1,331 rotary rigs at work, said Baker Hughes Inc. That compares with 1,169 rigs active during the same period a year ago.
Most of the increase was in land rigs, up by 11 to 1,213. Drilling activity in inland waters increased by 1 to 24 units. Offshore operations gained 4 rigs to 91 in the Gulf of Mexico and 94 in US waters as a whole.
Canada’s weekly rig count inched up by 4 to 271, up from 195 a year ago.
KOC lets contract for oil field upgrades
South Korea’s SK Engineering & Construction Co. has signed a $1.2 billion contract with Kuwait Oil Co. (KOC) to upgrade production sites and boost Kuwait’s oil output capacity.
SK will build 10 oil-gathering centers and a gas booster station in fields southeast of Kuwait City. SK plans to complete construction in July 2007.
In December, SK Corp. agreed to buy crude oil from KOC’s parent company, Kuwait Petroleum Corp., for 10 years.
Processing - Quick TakesTotal SA refinery strike ends in France
A workers’ strike that idled five of six Total SA refineries in France May 16 ended May 20 following 8 hr of negotiations between management and four trade unions (OGJ Online, May 20, 2005).
The strike had stopped production of as much as 932,000 b/d of products when all five refineries shut down. Total operates 6 of the 12 refineries in France.
Full production was expected to resume by May 26, a Total spokeswoman told OGJ, depending on the complexity of restarting some facilities.
Total conceded all trade union demands, the main one being a future freeze of “Pentecost Monday”-a former holiday with pay that the government had declared a working day without pay in aid of the elderly and infirm.
Total also will fully assume the government payment, give workers an extra paid day off in 2005, and pay them for 4 of the 5 strike days.
Tesoro plans coker at Washington refinery
Tesoro Corp., San Antonio, plans to add a 15,000 b/d coking unit at its 108,000 b/d refinery in Anacortes, Wash., said Chuck Flagg, senior vice-president of planning and optimization. The $175 million coker is expected to be operational by April 2007.
Addition of the unit will enable the refinery to produce feedstocks at the plant to supply its gasoline producing fluid catalytic cracking unit, he said. The company currently buys its feedstock.
Tesoro also plans to add a 10,000 b/d diesel desulfurization unit at its 72,000 b/d Kenai, Alas., refinery by April 2007 and a vacuum unit by spring 2006 to reduce by 2,000 b/d the amount of residuals produced, Flagg said.
Oman plans world-scale aromatics complex
Government-owned Oman Oil Co. SAOC plans a world-scale aromatics complex at Sohar, Oman, and has awarded a technology license package to France’s Axens for the processes. The complex is to be put into service on a fast-track basis, Axens said.
The complex, which will produce 210,000 tonnes/year of benzene and 810,000 tonnes/year of paraxylene, will be fed principally with naphtha from the Sohar refinery’s residuum fluid catalytic cracking unit.
Axens will provide basic engineering for a suite of technologies as well as the integrated package, and Uhde GMBH of Germany will provide basic engineering for an aromatics extractive distillation process.
Transportation - Quick TakesQueensland coalbed methane pipeline planned
Enertrade, a Queensland, Aus., utility, is planning a pipeline to transport coalbed methane from Moranbah field west of Mackay to the industrial center of Gladstone.
The 420 km line could have a capacity of more than 18.6 bcf/year and be on stream by 2007.
The new plan highlights the growing demand for gas along Queensland’s east coast. Coalbed methane supplies about 30% of the state’s gas demand.
Crosstex Energy plans pipeline expansion
Crosstex Energy LP, Dallas, plans to expand and extend the Crosstex LIG pipeline system to access natural gas being developed in northwestern Louisiana and to receive as much as 700 MMcfd of gas from East Texas to be delivered by a new interstate pipeline of Kinder Morgan Energy Partners LP. The estimated cost for the project is $225 million.
Extension of the Crosstex LIG system includes 65 miles of 36-in. pipeline starting from the existing system near Natchitoches and ending near Shreveport, La., where it will connect with the proposed Kinder Morgan Carthage Pipeline from the Bossier and Barnett Shale formations.
Within the existing LIG system, eight miles of pipeline will be looped to add capacity, and new gathering laterals will connect north Louisiana producers.
The expansion is expected to be in service by summer 2006.
Enbridge plans Texas gas pipeline links
An Enbridge Energy Partners LP subsidiary plans to invest $19 million on pipeline links in Texas to accommodate transportation of as much as 100 MMcfd of natural gas through the Atmos Energy Corp. intrastate pipeline system.
New pipeline will be added upstream and downstream of the Atmos system to complete a new link from North Texas to the head of Enbridge’s new natural gas transmission line at Bethel, Tex.
This 500 MMcfd East Texas transmission line offers delivery service to Houston Pipe Line Co. and Natural Gas Pipe Line Co. of America.
Completion of the final leg of the new transmission line is scheduled for the end of June, when it will increase access to the major Carthage, Tex., hub. The line’s capacity can be further expanded to 1 bcfd.
A 5-year term transportation agreement will go into effect in April 2006, when first deliveries are to begin.
BP tankers idled after rudder cracks found
Two double-hull oil tankers, the 193,050 dwt Alaskan Frontier and the Alaskan Explorer, were pulled from service in Alaska following the discovery of large cracks in their rudders, one 9 ft long.
San Diego-based National Steel & Shipbuilding Co. built the ships, which are owned and operated by BP Oil & Shipping Co USA.
